ravi.dutt@livemint.com
Textiles Secretary Upendra Prasad Singh told Mint that the central government may impose a temporary ban on export of cotton if cotton prices continue to rise. The statement comes at a time when the Indian textile industry is grappling with a spurt in cotton and yarn prices, affecting production and exports.
Cotton prices have barely doubled in a year 90,000 per candy. Prices of some varieties of cotton have also touched 100,000 per candy. The ban may free up cotton for the domestic market and thus help soften the prices.
High cotton prices disproportionately affect the Indian textile industry, as it is heavily dependent on cotton, in contrast to other markets, where the bulk of the man-made fibre.
Singh said cotton prices are unlikely to fall before October when the new cotton crop arrives. Singh said cotton prices have come down and the problem may persist for some time as there is a global shortage of cotton.
The statement comes a week after the government waived customs duty on imported cotton till September. Earlier, cotton imports were effectively taxed at 11%. “Cotton prices have not softened as we expected. It is not even rising, it is fixed at one point. We are evaluating further course of action and temporarily banning exports or imposing quantitative restrictions to check prices is an option.”
“However, policy decisions should not be a precarious or knee-jerk reaction and these are extreme steps – but we will do it if the need arises,” he said.
Experts said the jump in prices can be traced to the US ban on imports of cotton products from China’s Xinjiang region. Textile makers say rising costs have forced many of them to cut production. While customers bear rising prices “up to a certain point”, apparel manufacturers anticipate further resistance.
Manufacturers say the exemption in import duty would have been more beneficial if cotton was available immediately after placing the import order. But it takes about three months from the date of placing the cotton order and the discount has been given only till September.